‘Random’ Destruction

Once again, changes at Random House have made headlines in papers
throughout the country.

January 30, 2003

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Once again, changes at Random House have made headlines in papers throughout the country. The highly regarded head of the Random House Trade Group, heir to the old Random House, was summarily fired by Bertelsmann’s American chief, Peter Olson. Not only was Ann Godoff fired on January 16 after recently signing a three-year contract, but the whole of her publishing house is to be dismantled and placed under the control of the much more commercial paperback firm within the group, Ballantine Books. The reason is very clear. Olson made a point of saying in his memo that Random House was “the only…division to consistently fall short of their annual profitability targets.” The aim of this unusual statement was not simply to humiliate Godoff in addition to firing her–always a nice touch–but to warn everyone else at the greater Random House that this was the fate awaiting them if they did not meet their goals.

But what, precisely, were those goals? In all the articles, Olson’s assertion that Godoff had fallen $4 million short of her $6 million target was assiduously repeated. But no one asked what percentage this was of her unit’s sales goal, or what the Bertelsmann profit target was for the overall group. Surely, this is an important part of the story, and it is curious to see that so many trained business journalists did not even bother to ask it. As I’ve shown in The Business of Books, the owners’ profit demands determine what can be published. Presumably Olson’s goals for Godoff were based on the clearly commercial and mass market-oriented output of the rest of Random House (Knopf excepted). Godoff’s mistake was to adhere to the higher standards of Random’s past.

Nor did any of the articles mention that there was a certain déjà vu to this story. Fourteen years ago, Random House made the headlines, indeed, the front page of the New York Times, when S.I. Newhouse summarily fired Bob Bernstein, the company’s president for many years. Here too, Bernstein was accused of not making enough money, though it was never specified how serious his sins were. After Bernstein’s dismissal, numerous changes took place within Random House as a whole. He was replaced as president of Random by Alberto Vitale, under whose leadership Pantheon Books, the house that I directed, was deemed insufficiently profitable and subsumed under Knopf in exactly the same way that Random House will be merged into Ballantine. Faced with the new commercial pressures, a large number of major editors–not merely those at Pantheon–left in the ensuing years, and a new policy of spending ever-larger amounts for advances was instigated. But by 1999 it was clear that this policy had been a dismal failure; Random House had an operating profit of one-tenth of 1 percent that year. The firm was then sold to Bertelsmann, the German conglomerate.

Bertelsmann’s own newsletter has trumpeted the expectation that each subsidiary should make an annual operating profit of 15 percent while increasing sales by 10 percent. For the American holdings of Bertelsmann, which account for 40 percent of the country’s trade book sales, in excess of $2 billion a year, this would mean an additional $200 million of business each year.

Clearly, this is very difficult to achieve, and it explains why Ann Godoff and her colleagues were pressed to gamble on increasingly high advances in the hope that the necessary bestsellers could be delivered. All the articles give a detailed list of those books that didn’t quite make it: the $10 million advance paid to Stephen King and Peter Straub, which lost a great many millions; the $7 million-plus paid for the as-yet-unwritten second novel by Charles Frazier, author of the bestselling Cold Mountain. Of course, all such advances have to be approved by Olson himself, but it was unlikely that he would deliver a criticism of his own role in this policy. Indeed, a Random House spokesman stated simply that his participation in those decisions “had been taken into account.”

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One of the striking aspects of the coverage has been the degree to which Godoff’s competitors within the firm have followed the party line in badmouthing her. The Times made a point of reporting that Godoff “considered her unit’s books above the merely commercial popular fiction published by other divisions. She candidly told associates that she felt little personal interest or affinity for commercial romances, thrillers and other page-turners–the meat and potatoes of much of the publishing business.” I should note that I have never met Ann Godoff or Peter Olson. But I cannot be the only one who read these comments with distaste, seeing those who have decided to publish only the most commercial of books turn on someone who tried to do a little better.

As the papers called around to get opinions on all this, irony piled on irony. Alberto Vitale, who began this process, was quoted as being shocked and horrified. Likewise, Jason Epstein, who was among the first to condone the process of commercialization when it was initiated under Vitale, called Godoff’s firing “terrible” and “very sad.” But while former Random House people were unanimously expressing their sadness and disapproval, the press assured us that there was really nothing to worry about. “There’s no contradiction between literary quality and financial results,” Olson told the Wall Street Journal. In the Times, Felicity Barringer, who frequently writes about publishing, blandly assured us that “while the commercialization of the book business has been internalized by those who toil in it, industry experts say that commercialization is not incompatible with quality”–a comment for which no source or backup was given, and which is patent nonsense.

Perhaps realizing that her statement did not totally jibe with recent developments, Barringer turned to author Ward Just, who said, “What may really have changed, at least as much as the publishers, is the readers. You go back and look at the New York Times fiction bestseller list in the 1940s and early 1950s. It is loaded with serious books. It’s very, very hard now to find one.” Barringer describes this as a change in the market, only half of what Just says. The idea that what readers are offered might make a difference is dismissed out of hand.

In yet another example of unquestioned corporate newspeak, the Random House spokesman said that “this is an opportunity to preserve the continuity of Little Random editorial tradition and give it a better chance to achieve profitability. Random House will continue to do many, many books for a niche audience, books that will continue to appeal to the literary critical world.” Again, these statements went unquestioned, nor did anyone seem to find a logical lapse in the idea that an identical program would somehow result in infinitely greater profits.

What, apart from the ever-more-powerful push toward commercialization, was at work here? In Godoff’s defense, a number of unidentified sources point out that the $4 million that Random House did not make was equal to the profit from its backlist, which is now published in paperback by Vintage and counted as profit for that division instead. In 1989 Sonny Mehta of Knopf cleverly managed to take over the corporate paperback list, the highly prestigious Vintage. Incorporating the best titles from all the group’s backlists, there was no way that Vintage could be anything but an important cash cow. Here were the best, most lasting books from all the imprints controlled by Random House. The Faulkners and Capotes from Random House, the Chomskys and Foucaults from Pantheon, the Thomas Manns and Camuses from Knopf. Ironically, a great many of the books involved are titles that would never have made it into the current Random House catalogues: books that initially had no sure profits but were signed on by the editors at the time because of their quality. All publishers hope to benefit from the wisdom of the past in this way; healthy publishers used to make half their profits from the backlist each year. Clearly, this was a prize worth fighting for, and Godoff lost that battle.

Another factor is the size of the total annual profit expected by the privately held Bertelsmann. It’s been clear for some time that the foundation that owns it hopes eventually to sell it to the public, and the greater the profits, the higher the price is likely to be. We have here the odd picture of profit maximization and increasing commercialization in the interest of what is theoretically a not-for-profit entity.

And there is yet one more factor that cannot be overlooked. Obviously, as the Times and others noted, Olson has “his own targets to meet.” His compensation is based on his “success in meeting annual targets each year.” Thus, the personal income of a handful of managers is an essential factor in deciding what the future of American publishing will be.

Random House was one of the best-known names in American publishing, and indeed, it was for that reason that Bertelsmann decided to use it internationally. Now the best-known name in American publishing has been cheapened by those who bought it.

André SchiffrinAndré Schiffrin, founding director of the nonprofit publisher the New Press, is the author of The Business of Books and, most recently, Words and Money.